2006 (9) TMI 562 - AT - Central Excise

Summary

Issues involved:
The issue involves the inclusion of amortization cost of machinery received from a principal manufacturer in the assessable value for the purpose of levying Central Excise duty. The appellant challenges the order on the grounds of limitation and contends that the machinery received was used solely for branding purposes and not for manufacturing the goods.

Details of the Judgment:

1. Inclusion of amortization cost of machinery:
The appellants, manufacturers of Biscuits, received machinery free of charge from their principal manufacturer for use in manufacturing branded biscuits. The Revenue issued a Show Cause Notice for recovery of duty short paid, alleging that the amortized value of the machinery was not included in the assessable value. The Original authority confirmed a demand under Section 11A of the Central Excise Act, 1944. The Commissioner (Appeal) upheld the order. The appellant contended that the machinery was used for branding purposes and not for manufacturing, and its cost was already included in the assessable value. The Tribunal observed that the machinery received was solely for branding purposes, as per the agreement between the appellant and the principal manufacturer. The Show Cause Notice was deemed time-barred, as the Department was aware of the arrangement since 1996. Therefore, the appeal was allowed with consequential relief.

2. Challenge on the grounds of limitation:
The appellant argued that the Show Cause Notice issued in 2000 was time-barred, as assessments had been completed without any objection raised regarding additional consideration. The appellant maintained that the machinery received was for branding purposes only, and its cost was already accounted for in the assessable value. The Tribunal found that the Department was aware of the arrangement since 1996, and the Show Cause Notice was issued after a significant delay. Consequently, the Tribunal held that the recovery of differential duty was barred by limitation under Section 11A of the Central Excise Act, 1944.

3. Use of machinery for branding purposes:
The appellant clarified that the machinery received free of charge was used solely for affixing the brand on the goods and not for manufacturing. They argued that the cost of using the machinery for branding was already included in the assessable value. The Tribunal noted that the machinery was provided by the principal manufacturer specifically for branding purposes, as per the agreement. The appellant's contention that the machinery cost was already accounted for in the assessable value was upheld, and no further addition to the declared assessable value was warranted.

4. Compliance with assessment procedures:
The appellant highlighted that they had regularly filed RT 12 Returns and undergone assessments without any objection raised regarding the machinery received. They argued that the machinery cost was part of the cost of manufacture already included in the assessable value. The Tribunal observed that the appellant had complied with assessment procedures, and the Department was aware of the arrangement since 1996. Therefore, the Show Cause Notice issued in 2000 was considered time-barred, and the appellant was not found to have withheld information to evade duty payment.